Bridging Web2 and Web3: a16z Partner Discusses the Death of Crypto, Centralization of AI, and Crisis in Web2

The venture capital firm Andreessen Horowitz, also known as a16z, has a history of early investments in Web2 giants such as Twitter and Facebook, as well as in prominent startups like Lyft, Airbnb, Pinterest, Slack, and Robinhood, showcasing their keen eye for potential. Since investing in Coinbase and Ripple in 2013, this renowned Silicon Valley venture capital firm has also entered the Web 3 space. Chris Dixon, the head of a16z's Web 3 department, recently published a book titled "Read Write One" and last month, discussed the topics of the death of encryption and the trend of centralization in AI development in a YouTube video titled "Is Web 3.0 Dead?," warning of an impending crisis in internet business models within the next five years.

Web 2 is too centralized, business models will be reshuffled within five years

Chris Dixon first talked about the development of the internet, saying: "In the 90s, the internet was unidirectional, more like a read-only mode. Users mainly obtained information from it, and the concept of social media did not yet exist." It wasn't until after the millennium that things began to change. "With the rise of Web 2, I also got involved. This movement emphasizes the ability to read and write, with the core idea being that interaction replaces passive receipt of information. The rise of social media such as Twitter and Facebook is the embodiment of this concept," he said. Users realized they could not only consume on the internet, but also create content.

However, the development of the internet since then has faced a risk: the internet may eventually be dominated by a few large tech companies like Google, Amazon, Apple, Facebook, etc. Chris Dixon stated: "The internet was originally intended to establish a decentralized network, returning power and wealth to ordinary users, rather than concentrating it in the hands of a few large companies." He believes that this centralization issue is not good for innovation in the startup world or for society as a whole.

The top five tech companies account for half of the Nasdaq 100 index market value, with 95% of internet-related profits concentrated in these companies, and all signs point to this phenomenon continuing to worsen.

This phenomenon reminds Chris Dixon of an industry that has already declined in significance. In the traditional media industry in the United States, revenue and resources of television and broadcast channels are extremely centralized, controlled by a few channels. The eventual outcome of this is well known – these companies either are forced to transform or face a decline in influence.

However, this well-known venture capital partner who spans Web 2 and Web 3 also issues a warning about the development of the internet, not in terms of technology, but in terms of business models. As the phenomenon of market domination by tech giants continues to worsen, it will squeeze out others currently in the industry, as he previously mentioned, which is not conducive to innovation. He predicts that in the next 3 to 5 years, we will face an internet crisis, and many existing business models will disappear.

Web2 and Web3 are attractive because they break the Matthew effect

Chris Dixon said that when he and his colleagues entered the internet industry in the 90s, they were extremely excited about the potential of the internet. Because it had the potential to redistribute wealth and power, returning them to the edge of the internet, i.e., ordinary users.

The author adds: The Matthew effect refers to the phenomenon where the strong get stronger and the weak get weaker. "For to everyone who has will more be given, and he will have an abundance. But from the one who has not, even what he has will be taken away." This phenomenon illustrates the reality that under capitalism, it is more difficult for the middle class to rise. Web 3 was so attractive a few years ago because it broke down class barriers. Chris Dixon entered the era of Web 2 with the same mindset.

He also shared his views on the development of AI, saying, "The development of AI is remarkable, but if not restricted, it will further accelerate this centralization. Because AI technology requires enterprises with a large amount of funds, data, and powerful computing capabilities, which are precisely what large companies possess." This viewpoint is similar to the outlook previously expressed by Tether, the stablecoin giant, which invested in decentralized AI to address the issue of overly centralized AI development resources among traditional giants.

Tether ventures into AI! CEO says cash is abundant, will challenge Microsoft and Amazon.

Pointing out the current state of blockchain: regulating technology, not speculation

Chris Dixon extensively discusses blockchain technology in his book, believing that there are two cultures in blockchain: one is a speculative "casino culture," and the other is a more technology-focused "computer culture." However, the current industry situation is that the casino culture is dominant, which is not conducive to the healthy development of the industry. Therefore, he hopes that policies and regulations will curb speculative behavior while promoting positive technological development.

Unfortunately, in recent years, some policy decisions in the United States have actually encouraged this negative trend. While meme tokens continue to reach new highs, regulations continue to put pressure on those dedicated to technological innovation.

Advice from a16z partner: Dare to invest, when people say something is dead, it is often the time to buy

He also touched on some traditional finance skepticism towards the crypto industry, such as the FTX incident and Terra Luna. He gave the example that a hammer can be used to build a house or to destroy one, to illustrate that technology itself is neutral, depending on how users use it. Linking the application of specific technologies with the technology itself is a mistake.

AI and neural networks have existed for 80 years since 1943, but it is only in recent years that they have truly made significant technological advances. Every technology goes through many ups and downs, and a16z has always been committed to long-term investments, just like how they have repeatedly increased their investment in Coinbase over the decades and promoted incubators in the industry, because this is what the industry needs in the long run.

Finally, from the perspective of long-term involvement in startups, he explains why now is the time to increase investment in the blockchain industry. He said, "In fact, at the beginning of my career, people told me that the internet was already dead. I found that the best opportunities in my career often came when people said something was dead. My experience is that AI has its ups and downs, the internet has its ups and downs, and blockchain has its ups and downs. If you wait for the situation to improve before taking action, you will find yourself doing the same thing as a large group of people."